January 19, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW BRUNSWICK, N.J. -- Johnson & Johnson will cut 4 to 6 percent of its medical devices workforce over the next two years as part of a restructuring aimed at cutting $800 million to $1 billion in pre-tax costs by the end of 2016, the company announced this morning.
The cuts, which amount to approximately 3,000 jobs, will allow the division to “strengthen its go-to-market model, accelerate the pace of innovation, further prioritize key platforms and geographies, and streamline operations while maintaining high quality standards,” the company said in a statement. Officials said the company expects minimal impact on potential sales. Johnson & Johnson’s medical devices division has seen a slip in sales of about 3 percent over the past nine months.
“The bold steps we are taking today are to evolve our offerings, structure and footprint and increase our investment in innovation. These actions recognize the changing needs of the global medical device market and will deliver more value to customers, increasing our competitive advantage and driving growth and profitability for our business,” Gary Pruden, chairman of Johnson & Johnson Medical Devices, said in a statement.
Johnson & Johnson’s consumer medical devices business, vision care and diabetes care businesses will not be impacted by the layoffs, the company said.
Savings from the job cuts are expected to provide the company with more flexible production capabilities and resources to fund new growth opportunities. Johnson & Johnson said it expects to record pre-tax restructuring charges of approximately $2 billion to $2.4 billion, which will be treated as special items, of which approximately $600 million will be recorded in the fourth quarter of 2015. Johnson & Johnson stock added about 1 percent in pre-market trading to $97.98 per share.
On an FAQ posted on the company investor page, Johnson & Johnson said the job cuts should not negatively impact any of the $10 billion share repurchase program or future mergers and acquisitions.
The company did not provide an indication of when the cuts will begin. Officials said they will provide additional information about the restructuring plan during the company’s fourth quarter earnings conference call scheduled for Jan. 26.
The job cuts are not the only moves Johnson & Johnson has been making. Earlier this month, there were reports the company was looking to divest itself of its Athens, Ga.-based subsidiary, Noramco, a manufacturer of active pharmaceutical ingredients for painkillers, including oxycodone and hydrocodone. The company, which operates a 183,000 square-foot facility in Georgia, employs approximately 220 individuals and runs four shifts daily.
Johnson & Johnson, a highly diversified healthcare products company, has been making a number of collaborative moves with other large companies, including a new venture with Google’s life sciences spinoff Verily Life Sciences to create an independent surgical solutions company, Verb Surgical Inc. In March 2015, JNJ’s Ethicon, Inc. , a medical devices company, announced a strategic collaboration with Google Life Sciences. The focus of that collaboration was to develop robotic surgery platforms that integrated advanced technologies. The new company, Verb, will do the same thing.
